Replies to This Discussion

Permalink Reply by Jason Tees on February 19, 2011 at 4:17am

It sounds like you have an SBA 504 loan.  The 504 has a conventional loan in 1st position, then the SBA loan in 2nd lien position.  The servicer you are referring to is the Community Development Corporation (or CDC) who handles the servicing of the SBA insured portion of the loan.  I can tell you that when is comes to shorts sales, the SBA might agree to a short sale if it makes sense, but it is true that they will not agree to release the guarantors from a deficiency as part of the deal.  With that said, after the short sale transaction is consummated, the guarantors would have the opportunity to settle the deficiency if they can prove that they lack the assets or income to repay the debt in full. 

 

Overall, if the short sale will result in a better recovery than a foreclosure by the 1st lien holder, it only makes smart business sense for them to agree to the short sale.  Once a deficiency is established, then you can begin the Offer In Compromise process.

 

It is true that any unresolved debt would be referred to the Treasury, and they have all sorts of ways to get your money.  One method to be aware of it the Treasury Offset Program where they will take any tax return you are entitled to, which is often relevant to businesses that have showed huge losses and are expecting hefty tax returns.

 

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on February 19, 2011 at 4:26am

Jason -

 

Thanks for the "post".  The 1st will be whole when this is all done.  The 2nd, no so much....  The 1st is actually helping navigate the SBA portion even though they will be ok.  Sadly, this seller has NO Assets and already lost their residence to foreclosure. 

 

I have no offers and have been reducing the price regularly.  If it's reduced much more, the SBA will get nothing - if it EVER sells!  NOD has already been filed by the 1st.

 

Thanks again,

 

Thom Colby

Broker

Newport Beach CA

Jason Tees said:

It sounds like you have an SBA 504 loan.  The 504 has a conventional loan in 1st position, then the SBA loan in 2nd lien position.  The servicer you are referring to is the Community Development Corporation (or CDC) who handles the servicing of the SBA insured portion of the loan.  I can tell you that when is comes to shorts sales, the SBA might agree to a short sale if it makes sense, but it is true that they will not agree to release the guarantors from a deficiency as part of the deal.  With that said, after the short sale transaction is consummated, the guarantors would have the opportunity to settle the deficiency if they can prove that they lack the assets or income to repay the debt in full. 

 

Overall, if the short sale will result in a better recovery than a foreclosure by the 1st lien holder, it only makes smart business sense for them to agree to the short sale.  Once a deficiency is established, then you can begin the Offer In Compromise process.

 

It is true that any unresolved debt would be referred to the Treasury, and they have all sorts of ways to get your money.  One method to be aware of it the Treasury Offset Program where they will take any tax return you are entitled to, which is often relevant to businesses that have showed huge losses and are expecting hefty tax returns.

 

Permalink Reply by Jason Tees on February 19, 2011 at 5:12am

The other interesting twist in California is the "one action rule".  If the 1st lender forecloses via the non-judicial process (which I believe is the majority of foreclosures), the lender does not have the right to pursue the borrower/guarantors for a deficiency.  For this reason, I've found that many borrowers who feel like they experience less hassle and potential liability by skipping the short sale and not fighting the foreclosure.  Of course, that won't address the liability with the second lender, but then again neither does the short sale.